DE-RISKING EXECUTIVES FROM PERSONAL LIABILITY FOR COMPLIANCE FAILURES

Corporate executives have never been at higher personal risk due to compliance failures within their organisations. This includes risk of job loss, reputation and career damage, compensation claw back, and, most significantly, civil and even criminal liability. Boards and executive teams are quick to dismiss otherwise highly-performing executives who preside over business units in which misconduct – real or suspected – has occurred. Political institutions howl for personal accountability in the face of corporate scandal. And now more than ever, prosecutors are focused hard on brining cases against individuals.

To this end, in 2015, the US Department of Justice’s (DOJ) ‘Yates Memorandum’ sharpened existing DOJ policy by directing criminal and civil prosecutors to focus from the beginning of each case on identifying and prosecuting executives responsible for and involved in corporate misconduct. Companies are not eligible for “cooperation” credit unless they investigate and turn over to prosecutors all information in their possession concerning individuals involved in alleged misconduct. So even as companies defend themselves – defences which are typically predicated on the argument that no violation has been committed – they are incentivised to investigate and turn over information on their own executives in order to cut favourable deals for conduct they may not consider to be unlawful. And then, to resolve a matter with a corporate defendant, DOJ prosecutors must have a written plan to either bring cases against involved executives, or justify in writing why they are not bringing charges against individuals.